Rightscorp: a business founded on threats of Internet disconnection

Rightscorp, a company that went public last year, has an idea: they'll issue millions of legal threats to alleged music file-sharers, threaten them with millions in fines, and demand nuisance sums ($20/track) too small to warrant consulting with an attorney -- and they'll arm-twist ISPs into disconnecting users who don't pay up. Rightscorp has a secret system for identifying "repeat offenders" who use Bittorrent, and they believe that this gives them to right to force ISPs to terminate whole families' Internet access on the basis of their magically perfect, unknowable evidence of wrongdoing. They call this "holding the moral high ground." More than 72,000 Americans have had "settlements" extorted from them to date, though Rightscorp still runs millions in the red.

Rightscorp's rhetoric is that the sums it demands are "deterrents" to prevent wrongdoing, and that it wouldn't really want to sue people into penury. But it is a publicly listed company with a fiduciary duty to extract as much money as it can from the marketplace. It's a good bet that its prospectus and quarterly investor filings announce that the company will hold its "fines" down to the smallest amount that provides the deterrent effect -- instead of, say, "all the market can bear."

The legal theory under which Rightscorp is operating is pretty dubious: a belief that ISPs have a duty to terminate the Internet connections of "repeat offenders" based on a clause in the Digital Millennium Copyright Act of 1998. This theory has been sparsely litigated, but the one major case in which it has been tested went against Rightscorp's business-model. But as Joe Mullin points out in his Ars Technica profile of the company, they may be able to get past this hurdle just by suborning the increasingly corrupt, noncompetitive, inbred and rent-seeking ISP industry by giving them a piece of the action.

That murky legal landscape hasn't stopped both ISPs and content industries from thriving. Yet it's also made room for one attempt after another at leveraging copyright law into for-profit Internet policing schemes. Rightscorp is merely the latest incarnation.

In the future, the company hopes to get more ISPs to comply—and it will expect more of those that are already cooperating, said Steele. Ultimately, Rightscorp is hoping for a scenario in which the repeat infringers it identifies aren't just notified by e-mail. Instead, Steele hopes to see those users re-directed to a Rightscorp notice right at the moment they open their Web browsers.

"You wouldn't be able to get around the re-direct page, and you'd have to pay a fine to return to browsing," he explained. The company is in discussions with four ISPs about imposing such a re-direct page, according to Steele. But the details about which ISPs cooperate with Rightscorp, and how much they cooperate, is a secret that the company guards closely.

The reality is, Rightscorp is a tiny company seeking to change the behavior of industry behemoths like Comcast and Verizon. And while it seeks to wield a "big stick" in the form of a potential copyright lawsuit, at the end of the day, it's the company's music industry customers who would have to take such a bold step.

In the meantime, Steele doesn't want his company to appear antagonistic. Instead, he paints an optimistic picture that more ISPs will be coming to his side voluntarily.

"Every month we get more ISPs that are forwarding the notices," he said. "It's a unique business model, but it works. We believe five years from now, worldwide, this is how file sharing will be remediated. And we'll be the company that does it, around the world."